Banh v Banh
[2024] WASC 172
•8 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BANH -v- BANH [2024] WASC 172
CORAM: FORRESTER J
HEARD: 11 DECEMBER 2023 & 8 MAY 2024
DELIVERED : 8 MAY 2024
FILE NO/S: CIV 1610 of 2023
BETWEEN: Y BANH
Plaintiff
AND
NGOC LIEU BANH
Defendant
Catchwords:
Application to appoint receiver and manager - jurisdiction to appoint receiver and manager - Supreme Court Act 1935 (WA) s 25(9) - Discretionary remedy - Circumstances warrant appointment of receiver
Legislation:
Rules of Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
Receivers appointed
Category: B
Representation:
Counsel:
| Plaintiff | : | DJ Pratt & LCA Palmos |
| Defendant | : | M De Kerloy |
Solicitors:
| Plaintiff | : | Palmos Legal |
| Defendant | : | Mony De Kerloy |
Cases referred to in decision:
Moloney v Piachniarski [2004] WASC 240
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386
Vuong v Ngoc Lieu Bahn [2024] WADC 14
FORRESTER J:
(This judgment was delivered extemporaneously on 8 May 2024 and has been edited from the transcript.)
Introduction
These proceedings were commenced by the plaintiff on 9 June 2023 for a declaration as to the dissolution of a partnership between him and the defendant known as the Tan Hoa Grocery partnership, and the appointment of a receiver to wind up the affairs of the partnership.
The defendant opposes the application and submits that the only reasonable way for the matter to be resolved is to await the end of one final District Court proceeding, and then to distribute the assets after the payment of any liabilities determined to exist in those District Court proceedings. More recently, the defendant has sought a referral to a further mediation.
The partnership ceased trading in February 2019, when the partners sold the trading premises in Brisbane Street, Perth. Since then, the tax returns of the partnership have been completed, and the Australian Taxation Office (ATO) holds the refunds due.
A GST refund is owed to the new owners of the partnership's trading premises.
The parties have been unable to agree on the manner in which other property owned by them together could or should be sold.
Although it appears that in more recent times, some in-principle agreement has been achieved, mediation has failed.
The plaintiff terminated the partnership by letter dated 12 May 2023,[1] although there is a dispute as to whether the partnership was terminated at an earlier date.
[1] Affidavit of Y Bahn sworn 9 June 2023, 41 (YB009).
By motion filed on 13 June 2023, the plaintiff seeks the appointment of receivers and managers of the partnership. The consent of the proposed receivers and managers has been filed.
Factual background
I have before me the following affidavits, which the parties read into evidence:
(a)affidavit of Y Banh sworn 9 June 2023;
(b)affidavit of Ngoc Lieu Banh sworn 11 July 2023;
(c)affidavit (in reply) of Y Banh sworn 1 September 2023;
(d)affidavit of Henry David Playford sworn 7 May 2024; and
(e)affidavit of Ngoc Lieu Banh sworn 7 May 2024.
I will admit those affidavits subject to the qualification that the correspondence annexed is not received as evidence of the truth of its contents except insofar as the contents are, on their face, within the knowledge of the deponent.
In his first affidavit, the plaintiff deposed that there are a number of proceedings which have involved the partners. However, in reality only one is now continuing which is alleged to be against the partnership itself (District Court CIV 2067 of 2020). Even so, I have some difficulty in seeing from the pleadings how that matter relates to the partnership.
The plaintiff also deposed that there were outstanding tax returns which are required to be completed on behalf of the partnership, and a GST refund owed to the purchasers of the partnership's trading premises.
The plaintiff deposed as to the outcome of a mediation, and the failure of the defendant to affirm the settlement agreement, and the subsequent termination by the plaintiff of the settlement agreement.
By his lawyers, the plaintiff terminated the partnership, as I say, effective 12 May 2023.
The defendant disputed that there was any ongoing partnership, claiming it was effectively dissolved in February 2019 and its assets disposed of. She asserts there are no third party creditors, although it appears she is failing to take account of the new owners of the store premises. The defendant deposes that she lodged all outstanding tax lodgements on behalf of the partnership up until its conclusion in 2019.
The partnership assets are in a joint account. The parties both claim a property at 189 Brisbane Street Perth is a partnership asset. While, as I say, there is an in-principle agreement to sell it, there is no finalised agreement and, of course, it has not been sold. Each receives a 50% share of the rent, paid into their individual bank accounts.
There is no evidence before me of a partnership deed, or any documents dealing with the partnership assets.
There is no suggestion on the part of either party that the assets of the partnership are at risk. The plaintiff submits that a receiver and manager should be appointed, in effect, because he wishes to put an end to the matter.
The defendant originally resisted the application, on the basis that there was nothing a receiver could do to expedite the winding up of the partnership; that the matter was effectively on hold until the District Court proceedings are finalised and the receiver could do nothing in those proceedings. Accordingly, the exercise would be pointless and expensive.
One District Court proceeding is now finalised, following a trial before Zempilas DCJ in CIV 3180 of 2019. Her Honour's decision was delivered on 8 March 2024,[2] and there is no evidence that that has been appealed. As I say, I have some difficulty in seeing the connection of the other matter to the partnership, but I will assume it has some. That matter does not appear likely to be resolved in the near future, whether by negotiation or trial.
[2] Vuong v Ngoc Lieu Bahn [2024] WADC 14.
Both parties have filed affidavits deposing that settlement negotiations have taken place since the decision of Zempilas DCJ was delivered. However, the matter has not resolved. The plaintiff asserts he cannot properly ascertain the state of the partnership assets without further information from the defendant. The defendant asserts there is an issue as to the proper division of the balance of the partnership funds and that the plaintiff must account for his drawings before the matter can be resolved. On that basis, the defendant has requested that the matter be referred to mediation.
Statutory framework and legal principles
Section 25(9) of the Supreme Court Act 1935 (WA) relevantly provides:
A mandamus or an injunction may be granted, or a receiver appointed, by an interlocutory order of the Court or a judge in all cases in which it shall appear to the Court or a judge to be just or convenient that such order should be made; and any such order may be made either unconditionally or upon such terms and conditions as the Court or judge shall think just…
The application is made pursuant to O 51 of the Rules of the Supreme Court 1971 (WA).
The proper exercise of the jurisdiction to appoint a receiver rests upon the principle that the applicant's legal remedy to protect his or her right is inadequate and that equity should intervene by the special remedy of a receiver.
The power to appoint a receiver is discretionary. It has been said that the power to appoint a receiver is drastic, harsh and dangerous and is only to be exercised with utmost care and caution and only where the court is satisfied there is imminent danger of loss if not exercised.[3]
[3] National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386, 541.
However, in Moloney v Piachniarski,[4] Le Miere J observed:
[4] Moloney v Piachniarski [2004] WASC 240 [36] - [41].
…In Wedge v Wedge (1995) 12 WAR 489 consent orders were made for the dissolution of a farming partnership. The plaintiff sought an order for the appointment of a receiver and manager with a view to the sale of the partnership assets. Parker J referred to the 16th edition of Lindley & Banks on Partnership where, at par 23.150, the author quotes, without disagreement, from Lord Lindley: " … whilst if the partnership was already dissolved, the Court usually appoints a receiver, almost as a matter of course." His Honour went on to hold that although there was no apparent risk to the assets in the case, the circumstances attending the affairs of the partnership and the breakdown of relations between the parties brought the case within the category of serious dispute between the parties. The normal approach, his Honour said, is for a receiver to be appointed in circumstances such as those.
The author of the 18th edition of Lindley & Banks on Partnership, at para 23.160, makes the following comment on Lord Lindley's statement:
"Lord Lindley's use of the expression 'almost as a matter of course' in relation to appointments following a general dissolution should not be taken too literally. There is nothing approaching a presumption that a receiver will be appointed in such a case and sufficient ground will always have to be shown, as a Court of Appeal made clear in Toker v Akgul."
The author had earlier said at par 23.157 that where an action is brought seeking the dissolution of the partnership and/or the winding up of its affairs, a receiver and, in particular, a receiver and manager will more readily be appointed, but it is clear from the Court of Appeal's judgments in Toker v Akgul that such application will not be granted as a matter of routine. In every case, it will be necessary to show sufficient grounds for the appointment and that the expenses associated therewith will not be disproportionate to the nature and value of the partnership business.
The principle stated by Parker J in Wedge v Wedge has been followed in this Court in D'Souza v Aaronisle Pty Ltd [2003] WASC 111 and Groves v Groves [2004] WASC 79.
In Rowlands v Macdonald [2002] NSWSC 282, Barrett J referred to the general principle that where a partnership has been dissolved, the plaintiff is entitled as a general rule, and practically as a matter of course, to the appointment of an interim receiver. His Honour added the following qualification:
"But the remedy remains discretionary and it was emphasised by Powell J in Fitz-Gibbon v Khoury (unreported, NSWSC, 1 March 1985) that the court must pay attention to the surrounding circumstances:
'This general rule notwithstanding, it is equally well established that it is not inevitable that, in any such case, an interim receiver and manager will be appointed, and that the Court retains a residual discretion as to whether any appointment should be made; one of the bases upon which, in an appropriate case, an appointment will be refused, is that the consequences of such an appointment will be "ruinous" (see, for example, Walters v Taylor (1807)15 Ves 16; 33 ER 658; Tate v Barry (1928) 28 SR (NSW) 380; Sobel v Boston [1975] 2 All ER 282).' "
In my view, where the partnership is already dissolved, the Court will appoint a receiver if sufficient grounds are shown. The Court should not appoint a receiver as a matter of course, that is, merely because the partnership has been dissolved and one of the partners seeks the appointment of a receiver. However, where the partnership is already dissolved, the burden on a partner seeking the appointment of a receiver to show sufficient grounds for the appointment is much less than where the partnership is continuing. One situation in which the interests of the parties is best served by the appointment of a receiver is where there is a serious dispute between the parties or a breakdown of the relations between them that hinders or prevents the orderly winding up of the partnership affairs.
Disposition
The partnership assets appear to be agreed to be as follows:
(a)a sum of money in a Westpac bank account, from the proceeds of the sale of the partnership assets;
(b)tax returns owed to the partnership, presently held by the ATO; and
(c)a jointly held property in Brisbane Street, Perth, which is tenanted, with the rental income being equally split and deposited into personal accounts of the partners.
The plaintiff refers to an expected distribution from the liquidation of a company as an asset of the partnership, but it is unclear how this is anything but an asset owned by the plaintiff and the defendant in a capacity separate to the partnership. Again, I will assume, for the purpose of this ruling, that it is an asset, but I have some difficulty with that proposition.
The only agreed liability is a GST refund due to the purchasers of the partnership's trading premises by the partnership. The defendant denies any liability arising out of District Court action 2067 of 2020 is a liability of the partnership. The plaintiff disagrees.
A third 'loan' may also be said to be owing by the partnership, in the sum of $120,000.
On 11 December 2023, I adjourned the plaintiff's application, on the basis that the trial in District Court action 3180 of 2019 was imminent. However, I made it clear that I would look favourably upon the application in the circumstances of this case on this occasion. That was because the relationship between the parties is of such a nature that they appear incapable of reaching agreement on even the most basic matters, such as appointing a real estate agent and agreeing on an acceptable sale price for the remaining property.
The parties, as I say, appear to have reached an in-principle agreement as to the sale of the property, but have now opened up a new, and more complicated, front of dispute. They have had almost two months to resolve the matter since the decision of Zempilas DCJ was delivered, but have not done so.
Given the background of this matter, the previous mediation outcome, and the issues in dispute, I do not have confidence that a mediation will be an efficient use of court resources at this time.
I am satisfied that the relationship between the parties has broken down to such an extent that the only sensible means of winding up the partnership is to appoint a receiver. I am of the view that, with the proceedings in District Court action CIV 3180 of 2019 having been resolved, it is now appropriate for that to occur.
As the partnership is not a going concern, a receiver, but not manager, should be appointed.
I will make orders in terms of the plaintiff's Minute of Proposed Orders filed 8 May 2024.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AT
Associate to the Honourable Justice Forrester
14 MAY 2024
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